Remedies
Condition is an essential term of the contract which goes to the root or the heart of the contract
o This is a promissory condition which must be distinguished from a contingent condition, which is
some event upon which the existence of the contract hinges. A contingent condition may be either
condition precedent or a condition subsequent.
o A condition precedent provides that the contract shall not become binding until the occurrence of a
specified event
o A condition subsequent provides that a preciously binding contract shall come to an end on the
occurrence of a stipulated event
o A breach of promissory condition enables the party who is not in breach of contract either to
terminate performance of the contract and obtain damages for any loss suffered as a result of the
breach or to affirm the contract and recover damages for the breach
o A term may be held to be a promissory condition in one of three ways:
Statutory classification – Section 12 to 15 of the Sale of Goods Act 1979
Judicial classification – Condition by the court
Classification of the parties
The court must be satisfied that both the parties intended to use the word ‘condition’ in its
technical sense
A warranty is a lesser, subsidiary term of the contract
o A breach of warranty only allows the innocent party to claim damages; that is to say he cannot
terminate performance of the contract and must therefore continue to perform his obligations
An innominate term
o Recognised by the Court of Appeal in Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha
Ltd 1962
Facts of the case:
Ship owners let the vessel, Hongkong fir, to charterers for a period of 24 months. Clause 1 of
the contract obliged the owners to deliver a “seaworthy” vessel and Clause 3 further obliged
them to maintain the vessel’s seaworthiness and good condition. Upon initial delivery, the
vessel’s machinery was described to be in ‘reasonably good condition,’ yet required constant
maintenance due to its age. The vessel owner’s chief engineer was inefficient and incompetent,
and the vessel suffered numerous breakdowns and delays. The charterer’s repudiated the
contract, alleging a breach of the obligations to deliver and maintain a seaworthy vessel.
Judgement of the case:
Firstly, the Court held that in order to construe whether a contractual clause constitutes a
condition precedent, the breach of which permits repudiation, or an innominate term, the breach
of which permits damages, depends on a holistic assessment of the contract’s surrounding
circumstances in determining the intention of the parties in their treatment of the clause. On the
facts, the Court held that the seaworthiness and maintenance clause was not viewed as so
fundamental so as to amount to a condition of the contract, but rather constitutes a term
allowing damages. Secondly, the Court held that an innocent party cannot treat the contract as
repudiated due to delays, however significant, if the breach falls short of a frustration of the
contract rendering performance impossible. On the facts, the delays, albeit serious and repeated,
did not amount to a frustration of contract that entitled repudiation of the contract, but merely a
breach allowing for damages.
o Can be distinguished from a condition on the ground that breach of an innominate term does not
automatically give rise to a right to terminate performance of the contract, and can be distinguished
from warranty on the ground that the innocent party’s remedy is not confined to damages
o It gives the court an important degree of remedial flexibility
, o It can focus attention on the consequences of the breach by allowing a party to terminate
performance of the contract only where the breach of the innominate term has had serious
consequences for him. Certain factors are considered:
Any detriment caused or likely to be caused by the breach
Any delay caused
The value of performance received by or tendered by the party in breach conform with the
requirements of the contract
Any opportunity enjoyed the party in breach to remedy the discrepancies in its performance
The consequence of any prior breach of the contract by the party in breach and whether further
breached were a likely consequence of the breach at issue
Whether the party not in breach will be adequately compensated by an award of damages in
respect of the breach
In reality, formation and performance of a contract occur at virtually the same time but there may be a
considerable time lapse between the both of them and discharge of a contract (a contract brought to an
end) can occur in four ways
o By agreement
It must be supported by consideration
Where performance has not be completed by either party to the contract, there is no difficulty in
finding consideration because, in giving up their rights to compel each other to perform, each
party is giving something to the bargain.
But where the contract is wholly executed on one side, an agreement to abandon the contract
(unless the agreement to abandon the contract itself is supported by fresh consideration) will not
be supported by consideration and will be unenforceable unless the agreement is the form of a
deed or the party has fully performed his obligations under the contract is estopped from going
back upon his representation that he will not enforce the original contract or he is held to have
waived his rights under that contract
A contract may be discharged by the operation of a condition subsequent which has been
incorporated into the contract
o By performance
Where the performance by both parties complies fully with the terms of the contract
o By operation of law
By the occurrence of a frustrating event
By breach
o Committed when a party without lawful excuse fails or refuses to perform what is due from him
under the contract, or performs defectively or incapacitates himself from performing – Treital
o The question whether or not a contract has been breached depends on the precise construction of
the terms of the contract and there are two types of remedies
Self-help remedies – termination for breach and under express termination clause, withholding
performance Vs court-ordered remedies – action for an agreed sum, specific performance,
damages
Unlike in termination for breach, express termination clauses can be triggered by an event
and not a breach, can be automatic without election and there will be no damages for loss
suffered as a result of the termination of contract:
Primary vs Secondary remedy
o Many obligations created by a contract are strict; that is to say liability does not depend upon proof
of fault. Eg. Strict contractual obligation provided by section14(2) of the Sale of Goods Act 1979
which states that where a seller sells goods in the course of a business, there is an implied condition
that the goods supplied under the contract are satisfactory quality. Where the obligation is not
strict, it is for the party alleging the existence of the breach of contract to prove that a breach has
occurred.
o A breach of contract gives various options to the party who is not in breach. The extent of these
options depends upon the seriousness of the breach. Even the most serious breach, does not, of
itself, terminate or discharge the contract
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Condition is an essential term of the contract which goes to the root or the heart of the contract
o This is a promissory condition which must be distinguished from a contingent condition, which is
some event upon which the existence of the contract hinges. A contingent condition may be either
condition precedent or a condition subsequent.
o A condition precedent provides that the contract shall not become binding until the occurrence of a
specified event
o A condition subsequent provides that a preciously binding contract shall come to an end on the
occurrence of a stipulated event
o A breach of promissory condition enables the party who is not in breach of contract either to
terminate performance of the contract and obtain damages for any loss suffered as a result of the
breach or to affirm the contract and recover damages for the breach
o A term may be held to be a promissory condition in one of three ways:
Statutory classification – Section 12 to 15 of the Sale of Goods Act 1979
Judicial classification – Condition by the court
Classification of the parties
The court must be satisfied that both the parties intended to use the word ‘condition’ in its
technical sense
A warranty is a lesser, subsidiary term of the contract
o A breach of warranty only allows the innocent party to claim damages; that is to say he cannot
terminate performance of the contract and must therefore continue to perform his obligations
An innominate term
o Recognised by the Court of Appeal in Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha
Ltd 1962
Facts of the case:
Ship owners let the vessel, Hongkong fir, to charterers for a period of 24 months. Clause 1 of
the contract obliged the owners to deliver a “seaworthy” vessel and Clause 3 further obliged
them to maintain the vessel’s seaworthiness and good condition. Upon initial delivery, the
vessel’s machinery was described to be in ‘reasonably good condition,’ yet required constant
maintenance due to its age. The vessel owner’s chief engineer was inefficient and incompetent,
and the vessel suffered numerous breakdowns and delays. The charterer’s repudiated the
contract, alleging a breach of the obligations to deliver and maintain a seaworthy vessel.
Judgement of the case:
Firstly, the Court held that in order to construe whether a contractual clause constitutes a
condition precedent, the breach of which permits repudiation, or an innominate term, the breach
of which permits damages, depends on a holistic assessment of the contract’s surrounding
circumstances in determining the intention of the parties in their treatment of the clause. On the
facts, the Court held that the seaworthiness and maintenance clause was not viewed as so
fundamental so as to amount to a condition of the contract, but rather constitutes a term
allowing damages. Secondly, the Court held that an innocent party cannot treat the contract as
repudiated due to delays, however significant, if the breach falls short of a frustration of the
contract rendering performance impossible. On the facts, the delays, albeit serious and repeated,
did not amount to a frustration of contract that entitled repudiation of the contract, but merely a
breach allowing for damages.
o Can be distinguished from a condition on the ground that breach of an innominate term does not
automatically give rise to a right to terminate performance of the contract, and can be distinguished
from warranty on the ground that the innocent party’s remedy is not confined to damages
o It gives the court an important degree of remedial flexibility
, o It can focus attention on the consequences of the breach by allowing a party to terminate
performance of the contract only where the breach of the innominate term has had serious
consequences for him. Certain factors are considered:
Any detriment caused or likely to be caused by the breach
Any delay caused
The value of performance received by or tendered by the party in breach conform with the
requirements of the contract
Any opportunity enjoyed the party in breach to remedy the discrepancies in its performance
The consequence of any prior breach of the contract by the party in breach and whether further
breached were a likely consequence of the breach at issue
Whether the party not in breach will be adequately compensated by an award of damages in
respect of the breach
In reality, formation and performance of a contract occur at virtually the same time but there may be a
considerable time lapse between the both of them and discharge of a contract (a contract brought to an
end) can occur in four ways
o By agreement
It must be supported by consideration
Where performance has not be completed by either party to the contract, there is no difficulty in
finding consideration because, in giving up their rights to compel each other to perform, each
party is giving something to the bargain.
But where the contract is wholly executed on one side, an agreement to abandon the contract
(unless the agreement to abandon the contract itself is supported by fresh consideration) will not
be supported by consideration and will be unenforceable unless the agreement is the form of a
deed or the party has fully performed his obligations under the contract is estopped from going
back upon his representation that he will not enforce the original contract or he is held to have
waived his rights under that contract
A contract may be discharged by the operation of a condition subsequent which has been
incorporated into the contract
o By performance
Where the performance by both parties complies fully with the terms of the contract
o By operation of law
By the occurrence of a frustrating event
By breach
o Committed when a party without lawful excuse fails or refuses to perform what is due from him
under the contract, or performs defectively or incapacitates himself from performing – Treital
o The question whether or not a contract has been breached depends on the precise construction of
the terms of the contract and there are two types of remedies
Self-help remedies – termination for breach and under express termination clause, withholding
performance Vs court-ordered remedies – action for an agreed sum, specific performance,
damages
Unlike in termination for breach, express termination clauses can be triggered by an event
and not a breach, can be automatic without election and there will be no damages for loss
suffered as a result of the termination of contract:
Primary vs Secondary remedy
o Many obligations created by a contract are strict; that is to say liability does not depend upon proof
of fault. Eg. Strict contractual obligation provided by section14(2) of the Sale of Goods Act 1979
which states that where a seller sells goods in the course of a business, there is an implied condition
that the goods supplied under the contract are satisfactory quality. Where the obligation is not
strict, it is for the party alleging the existence of the breach of contract to prove that a breach has
occurred.
o A breach of contract gives various options to the party who is not in breach. The extent of these
options depends upon the seriousness of the breach. Even the most serious breach, does not, of
itself, terminate or discharge the contract
2
